Oct 21, 2024
The Goods and Services Tax on premiums paid by senior citizens for health insurance and premiums paid by all for term life insurance may be exempted as most members of a ministerial panel set up specifically to study this agreed in favour of extending such relief on Saturday.
Separately, the Group of Ministers (GoM) on rate rationalisation also discussed Saturday a GST rejig for several items and proposed cutting rates for some items such as packaged water above 20 litres (5 per cent from 18 per cent), bicycles priced less than Rs 10,000 (5 per cent from 12 per cent) and exercise notebooks (5 per cent from 12 per cent).
Shoes above Rs 15,000 and wrist watches above Rs 25,000 are likely to be shifted to the topmost slab of 28 per cent GST from 18 per cent now, a state finance minister said. This rate rejig exercise will help the states and Centre to realise revenue gain of Rs 22,000 crore, which will help cover the revenue loss from reduction in GST rates for insurance premiums and other items, the minister said.
For the insurance sector, GST on term life insurance premiums are likely to be exempted for all persons, including plans that consist of family members. Health insurance premium paid by senior citizens irrespective of coverage would also be exempted. For other citizens, health insurance cover till Rs 5 lakh is likely to be exempted and the existing rate of 18 per cent will be charged for health insurance cover over Rs 5 lakh.
“Every GOM member wants to give relief to people. Special focus is on senior citizens. We will submit a report to the Council. Work is being done to reduce the GST rate from 18 per cent, exemption will be given for certain categories (of insurance premium). The final decision will be taken by the GST Council,” Bihar Deputy Chief Minister Samrat Choudhary, who is the convenor of both the GoMs on insurance and rate rationalisation, said after the two meetings.
In its 54th meeting held on September 9, the GST Council had broadly converged on the need to reduce the tax rate for health and life insurance premiums from 18 per cent but the specific proposal was referred to the GOM on life and health insurance premium for further discussion. The existing six-member GOM on rate rationalisation was expanded to form a 13-member GOM on life and health insurance premium with the mandate to submit their report by October-end. The GST Council will meet in November to take a final decision on the rate recommendations by both the GoMs.
“There were discussions held in the meeting. Most states are on board for exempting term life insurance premium from GST. Term life insurance plans which include family members are also going to be exempt. For health insurance, total relief would be given for insurance premiums paid by senior citizens and exemption would be given for health insurance cover up to Rs 5 lakh for others. The existing 18 per cent GST rate will be retained for health insurance cover above Rs 5 lakh,” a state finance minister, who is a member of the GOM, said after the meeting on Saturday.
The revenue implication of the exemption proposal for senior citizens for health insurance is expected to be around Rs 2,200 crore and Rs 200 crore for exemption to term cover premiums. The revenue loss is going to be offset by gains of around Rs 22,000 crore from the proposed hike in rates on several high-end items, sources said.
Rate rationalisation was discussed in the second meeting of the GOM that included rate changes for several common-use items such as packaged water, bicycles and exercise notebooks. The broad consensus was to provide relief on consumer goods and charge a higher rate for items with premium value. The GoM has proposed a reduction in the GST rate for packaged drinking water bottles above 20 litre to 5 per cent instead of 18 per cent at present. Bicycles costing less than Rs 10,000 are likely to be charged 5 per cent GST as against 12 per cent at present, whereas GST on exercise books may get reduced to 5 per cent from 12 per cent.
The GoM on rate rationalisation will continue to discuss proposals for rate rejig including merger of slabs, another state finance minister said.
“Rate rationalisation is an ongoing process. Several items of common use have been discussed. More discussions are pending, especially for demerit goods in the 28 per cent slab and for items which were reduced earlier from the 28 per cent slab to 18 per cent or 12 per cent,” the minister said.
In December 2018, the GST Council had reduced rates for several items in the 28 per cent slab including movie tickets priced above Rs 100, television screens and monitors up to 32 inches, digital cameras, video games consoles and power banks with lithium-ion batteries. Items such as dishwashing machines, pan masala, cigarettes, air conditioners, cars, and aircrafts for personal use continue to be in the 28 per cent slab.
The decision to reduce GST on insurance premiums has come after several Opposition leaders raised the issue of high tax on premiums. Opposition leaders including Leader of Opposition in Lok Sabha Rahul Gandhi Trinamool Congress chief Mamata Banerjee have demanded withdrawal of GST on life and health insurance premiums. Banerjee had also written a letter to Union Finance Minister Nirmala Sitharaman for rollback of GST on life insurance and health insurance premiums.
Earlier on July 28, Union Minister of Road Transport and Highways Nitin Gadkari wrote to Finance Minister Sitharaman, saying GST on life and medical insurance premiums amounted to taxing the “uncertainties of life”. Sitharaman had said in August that tax was levied on insurance premiums even before the imposition of GST and that GST revenues are shared between states and the Centre.
In 2023-24, the Centre and states had collected Rs 8,262.94 crore through GST on health insurance premiums, while Rs 1,484.36 crore was collected on account of GST on health reinsurance premiums.
Source: Indian Express